Employee Referral Programs – Pros and Cons

Employee Referral Program is a tried and tested method of recruiting that has retained its popularity amid all the new developments in the domain of recruiting. It is still widely believed that “referrals make the best hires.” Therefore, a carefully crafted employer referral program yields productive candidates at a quicker pace and effectively reduces attrition rate as employees hired through the process are much likely to stick to the job for a longer period compared to their counterparts. Besides, it’s cost effective too, for existing employees in companies scout for apt candidates for a position from their social circle. And for every successful hire, the referring employee is adequately compensated with a referral bonus.Realizing the importance of ERPs, talent hunt firms and HR departments in small and big companies are channelizing their efforts to come up with effective employee referral programs to procure better employees in the long haul. A lot of attention and planning is done on how to popularize such programs, make them effective enough so that referring employees act responsibly by recommending capable candidates and of course the compensation package or referral bonus for employees. ERPs are also a great way to get to passive candidates.

In fact, besides companies and sourcing agencies, even referral websites are coming up to tap into the efficacy of the method. Referral Feed, for instance, is one such website in the beta state, which provides agencies and companies with employee referrals. Its official website reads thus:

“We all know the best job candidates come from referrals, and now you have a custom referral generator. Referral Feed improves talent acquisition by identifying candidates who are more likely interested in your opportunities. You hand pick co-workers for a specific team networking group, and Referral Feed’s patent-pending algorithm produces a corresponding list of active and passive candidates. It is simple and quick – both for recruiters and participating co-workers. Most importantly, it will make everyone’s job easier and much more productive.”

But whatever the benefits of ERPs, it can never be a substitute for the traditional methods like placing advertisements in newspapers or job portals on the internet. The reasons for it are many. An employee’s social circle, for example, is limited and can in no way match the vast pool of diversified potential employees, accessed by the other two methods. Hence leveraging recruitment process solely on the referral program would not be a very good idea. But at the same time, it could prove to be a good supplement to the other more popular methods normally used by agencies and companies.